In Europe, too, the social democratic settlement enjoyed phenomenal success in the decades following the war. Yet people like Brooks disparage the European social model. An un-nuanced analysis might note, correctly, that real GDP per capita in the Euro Area is only about 70 percent of what it is in the United States. But this is misleading on a number of levels. GDP per capita is a product of three separate factors—productivity, the employment rate, and average hours worked. It turns out that productivity in Europe is not that different from productivity in United States (although it is weaker in southern Europe). Nor is employment as different as some imagine, especially for prime-age workers. The big difference is in average hours worked, which reflects a conscious choice to forsake extra work in favor of family and leisure. This is a feature of Europe’s social market, not a bug.
Not surprisingly, Europe beats the United States on a host of human-development and quality-of-life indicators. Poverty and inequality rates are lower. Life expectancy and infant-mortality rates are better. And yes, this is in large part due to extensive safety nets. In disparaging these programs, Brooks fails to mention their genuine achievements, or the fact that the European countries in the worse economic condition are precisely those, in southern Europe, with the most underdeveloped welfare systems. Nor does he mention the fact that the United States has effectively stopped fighting poverty in the aftermath of the Reagan revolution. As Anthony Atkinson—one of the giants in the field—pointed out, no advanced economy has managed to achieve a low level of inequality or relative poverty with low levels of social spending.
In sum, the European social model shows that prosperity can go hand in hand with fairness and cohesion. This is especially the case in Scandinavia, the quintessence of modern social democracy, where citizens readily accept high taxes to ensure that everyone has access to quality education, health care, child care, and other social services. Despite the claims of libertarians, Scandinavia shows that it is perfectly possible for a modern economy to be simultaneously productive, fair, compassionate, sustainable—and happy.
The last point is important, because Brooks devotes so much attention to happiness. He is right to do so, although the evidence fails to back up his claims. In this year’s World Happiness Report, half of the top-ten happiest countries in the world are Scandinavian—Norway, Denmark, Iceland, Finland, and Sweden. Rounding out the top ten are Switzerland, Netherlands, Canada, New Zealand, and Australia. The United States ranks fourteenth.
A key finding of the happiness literature is that, above a certain minimal threshold, money does not buy happiness. In the United States, while income per person has risen roughly threefold since 1960, happiness has not. This is known as the Easterlin Paradox. But this finding would not have surprised Aristotle, who understood that happiness was driven by such factors as relationships, meaning, and purpose. Modern happiness studies affirm this ancient instinct. Brooks himself points to a study showing that happiness derives from “intrinsic goals” rather than “extrinsic goals” like wealth or fame. What tends to matter most for happiness is the quality of social relations and the ability to make a social contribution. And indeed, the World Happiness Report demonstrates that happier countries enjoy stronger social support, higher levels of trust and generosity, and a greater ability for people to realize their capabilities. Even more, it shows that social factors have a larger effect on happiness than financial factors. Jeffrey Sachs has shown that happiness is declining in the United States not because of income, but because of a mounting social crisis—rising inequality, isolation, mistrust, and corruption. And it is precisely the libertarian policies favored by Brooks that drive this crisis. Sachs also demonstrates that “economic freedom”—measured by a Heritage Foundation index capturing such elements as property rights, small government size, low levels of regulation, and open markets—does not produce happiness. In short, libertarianism is at odds with human nature. The church has known this all along.
One of Brooks’s main arguments is that income inequality is nothing to worry about, and that the real focus should be on equality of opportunity. The gist of his argument is that, while income inequality in the United States might be high and rising, this is not true for consumption inequality. This is a peculiar argument. It is of course important to look at consumption. But a quick perusal of the recent evidence shows that consumption inequality has tracked income inequality quite closely over the past few decades. Brooks is simply wrong. And anyway, the focus on income can easily be defended on the grounds that income provides advantages that go beyond consumption.
What Brooks is trying to say is that because poor people have access to goods that their predecessors did not, such as air-conditioning and color television, we should not worry too much about inequality. But this appeal to historical comparison is actually ahistorical; it overlooks the fact that poverty and wealth are always contextual. What matters is not that even many poor Americans now own devices and enjoy conveniences that would have astonished the richest robber baron of a century ago. What matter are the material conditions that allow one to participate and flourish across the various dimensions of life in a specific time and place.
Brooks also downplays distributional concerns by appealing to the familiar fact that, while inequality within countries has risen sharply in recent decades, inequality between countries has fallen: the gap between the rich and poor countries is shrinking. This development reflects the remarkable achievement of countries like China, which transformed itself from an impoverished village-based nation to a middle-income economy within a matter of decades. Nevertheless, the nation state remains the locus for deliberation on the common good and the most effective political instrument for distributive justice. We therefore have good reason to be concerned about growing inequality within our borders, since that is the inequality over which we have some control as citizens. Why should the rise of a large middle class in the developing world, welcome as it is, justify an increasingly uneven and inequitable division of wealth in the developed world?
The real problem with inequality is that it severs the sense of shared purpose necessary for the realization of the common good. This is an insight that goes all the way back to Plato and Aristotle, who feared that when the gap between rich and poor grows too large, the rich become more attached to their wealth than to their civic obligations. The founding fathers of the United States fretted about oligarchy for similar reasons. This older insight seems to have been largely forgotten, but it is highly relevant today—because inequality has returned to Gilded Age levels, and because market ideology has detached the creation of wealth from social duty.
Today, as during the Gilded Age, inequality is being driven by technology and globalization. But in both periods, it quickly developed a momentum of its own. This self-perpetuation is a key theme of Thomas Piketty’s Capital in the Twenty-First Century, which argues that inequality is endemic to capitalism, since the financial return on wealth tends to exceed the rate of economic growth over long periods of time. Branko Milanovic, another leading expert in global inequality, has reached similar conclusions with somewhat different reasoning. Milanovic argues that while inequality in each period has been spurred by underlying economic factors, it soon ushers in policies that favor the rich—cuts for upper income and capital taxes, curbs on the bargaining power of labor, greater tolerance for monopoly power, and looser restraints on financial innovation. From this perspective, market ideology might be nothing more than a mask for plutocracy.
The evidence suggests that in a highly unequal society the sense of an all-encompassing common good tends to evaporate. As the rich grow increasingly segregated from the rest of society and more convinced that wealth is always and only the product of individual effort, their circles of fraternity and ethical horizons tend to narrow. Wealthy individuals and powerful corporations increasingly put narrow financial gain over the broader common good. And since an unequal distribution of income translates too easily into unequal access to political power, the rich have the ability to get what they want and keep what they have. In this retreat from the common good, it is the poor who get trampled.
The relationship between economic growth and inequality is complicated. Neoclassical economics has traditionally insisted on a trade-off between equity and efficiency; it has warned that efforts to reduce inequality can undermine incentives to work, save, and invest. But in present circumstances, this doesn’t seem to be the case. The IMF has shown that income inequality is associated with less sustained economic growth and that growth trickles up from the poor and middle classes, not down from the rich.
Why might inequality hurt prosperity? There are a number of reasons. First and simplest, demand is lower in a more unequal economy. This is because the rich spend less of their income and save more. Second, inequality goes hand in hand with a decline in trust and social capital, which in turn harms productivity and increases the likelihood of social strife and political instability. Third, because the common good is undermined, inequality reduces the likelihood of growth-enhancing investments in areas like infrastructure, education, decarbonization, and research and development. Fourth, inequality tends to be associated with corporate rent-seeking—the tendency to extract rather than create wealth, driven by such factors as monopoly power, corporate concentration, and weak corporate governance.
There is a fifth reason that is directly relevant to Brooks’s argument: inequality of income is directly tied to inequality of opportunity. This is because inequality magnifies the social advantages of the wealthy. Plutocracy rewards mediocrity and undermines meritocracy. Unsurprisingly, there is a strong empirical association between income inequality and intergenerational mobility—the famous “Great Gatsby curve”—and both are better in Europe than in the United States. The bottom line is that if Brooks truly cares about inequality of opportunity, he should also care about inequality of income and wealth.
In downplaying the detrimental effects of American inequality, Brooks draws a distinction between the United States and other highly unequal regions in the world, such as Latin America. He argues that, in these other places, prosperity depends more on power and privilege and less on the free market. He’s right about that. But he fails to note that as the United States inches ever closer to Latin American levels of inequality, the corrupting effects of plutocracy become ever more embedded in our own system. It is important to point out that in Latin America, the pattern tends to be one of oligarchic dominance interspersed by disruptive populist backlashes—and both harm the common good. Given recent trends, perhaps the United States is destined to go down this path. Perhaps last year’s election actually represents a terrifying regime shift. The catch, of course, is that Donald Trump is a plutocrat masquerading as a populist.
The corrosive effects of inequality extend well beyond the economic dimension. In a pioneering study titled The Spirit Level, social epidemiologists Richard Wilkinson and Kate Pickett showed that people in more unequal societies trust each other less, fear each other more, participate less in community life, and are more prone to violence. In the United States, Robert Putnam and others have documented a decades-long decline in social capital, civic purpose, and associational life—all in tandem with rising inequality. Wilkinson and Pickett tie fraying social relations to a litany of social ills—including poor physical and mental health, drug abuse, weak educational attainment, obesity, teenage pregnancy, and illness among poor children. The social dysfunction is also tied to the neoliberal ideology that is driving much of the inequality. This ideology stunts not only solidarity but self-worth. It sends a toxic mixed message—telling people that happiness comes from consumerism and that market outcomes reflect moral desert: those who do not succeed have only themselves to blame. Not surprisingly, the growing prevalence of this outlook has been linked to an unprecedented epidemic of stress, loneliness, and mental illness. In the United States, the recent rise in opioid addictions and the documented decline in the life expectancy of working-class white people adds to the long list of social pathologies. Having a color television or air conditioning—to use Brooks’s favorite examples of the luxuries of the poor—is a paltry consolation prize in the face of massive social collapse.
Brooks is well aware of the claims that market ideology—by emphasizing such traits as selfishness, competitiveness, and boundless acquisitiveness—can undermine virtue. Yet he has no real answer other than to say that “systems are fundamentally amoral” and that what matters is the morality of the people who participate in the system. But this view is not in accord with Catholic social teaching. In Caritas in veritate Pope Benedict XVI states explicitly that the economic sphere cannot be regarded as “ethically neutral”: “It is part and parcel of human activity and precisely because it is human, it must be structured and governed in an ethical manner.” Indeed, as the theologian David Cloutier pointed out in his own response to Brooks, it is ludicrous to conjure up a powerful economic system that depends on such vices as fear and greed, and then claim that the problem is only with the vices, not with the system itself.
The bottom line is that the toxic interplay of inequality and ideology gives rise to an economic system antithetical to solidarity. It gives rise to what Pope Francis has described as the economy of exclusion, the throwaway culture, and the globalization of indifference.